Yen Holds Gains After Sudden Surge; Dollar Awaits US Jobs Data

The Japanese yen held onto its recent gains on Thursday, following a sharp but brief rally in the previous session that left currency markets on alert. The move, which saw the yen strengthen nearly one percent against the dollar, has prompted speculation that Japanese authorities may have conducted a rate check, though most analysts believe it was not a direct intervention.

The yen's strength was broad-based, pushing the euro and sterling down roughly one percent against the Japanese currency on Wednesday. Both currencies were nursing those losses in early Asian trading on Thursday.

Currency strategists noted that the size of the move was relatively modest for an official intervention. However, the possibility of a rate check—a softer tool used by authorities to gauge market conditions—has kept traders cautious.

The dollar remained on the back foot against a basket of major currencies, while the euro and sterling attempted modest recoveries. Elsewhere, the New Zealand dollar edged up after sliding on a dovish signal from its central bank, and the Canadian dollar held steady after the Bank of Canada kept rates unchanged while hinting at future tightening.

All attention now turns to Friday's US nonfarm payrolls report. Analysts expect an increase of 56,000 jobs, following a surprising drop in July. The unemployment rate is forecast to hold at 4.1 percent. Markets are currently pricing in a 61 percent chance of a Federal Reserve rate hike in September, and a significantly weaker jobs number would be needed to alter those expectations, especially after recent hawkish comments from the Fed chair.